This week in coins: Ethereum posts its biggest losses of Merge Week

This week in coins. Illustration by Mitchell Preffer for Decrypt.

Ethereum is badly down after the merge week. The long-awaited transition to a proof-of-stake network has happened on Thursday as planned. After that, Ethereum (ETH) dropped 8% to below $1,500 and continued to fall.

ETH starts the weekend at $1,424, down 17% over the past seven days. It has seen the biggest losses among the top 30 cryptocurrencies by market cap this week.

Market leader Bitcoin (BTC) also fell. It closes 7% lower on Saturday than last week and is hovering around $19,788 at the time of writing.

After Ethereum, the second-biggest losses – down just over 10% – were recorded by Near Protocol (NEAR), which is trading at $4.24; Avalanche fell to $18.06 and Polkadot fell to $6.87, all called “Ethereum Killer”, also known as Layer 1 blockchains with highly functional smart contracts.

Ethereum Classic (ETC) is down 12.6% and is trading at $34.27. ETC is based on Ethereum’s original ledger, which includes an infamous $55 million DAO hack that was deleted from Ethereum by vote.

All of the top 30 cryptocurrencies are down over the past week except for Ripple Token XRP, which is up 2%, and Cosmos (ATOM), which is up 3.5%. Cosmos differs structurally from Ethereum as it is a network of many smaller blockchains, but also offers highly functional smart contracts.

Ethereum after the merger

On Thursday, Ethereum made the long-awaited transition from a blockchain validated by a proof-of-work consensus mechanism — like the one currently deployed by Bitcoin, where miners with the most computing power generate the most coins — to a much more energy-efficient proof -of-stake algorithm – where miners who stake the most ETH validate the most transactions and reap the rewards.

The transition worked without problems. A Crypto Carbon Ratings Institute (CCRI) report commissioned by Ethereum-centric software firm ConsenSys claims that Ethereum consumes approx. 99.99% less energy after merging. If the number is true, the upgrade has even slightly beat Ethereum forecasts.

However, the merger has also resulted in a more centralized Ethereum. According to Martin Köppelmann, co-founder of the DeFi platform Gnosis, Coinbase and the liquidity staking pool Lido Finance are eliminated together 42% of post-merge Ethereum validatorsand the top seven companies control more than two-thirds of the share used to validate transactions.

Cables from Washington

Crypto news out of Washington wasn’t encouraging either, although it’s unclear if this contributed to the price declines.

On Thursday, during an oversight hearing by the Senate Banking Committee, Republican Senator Pat Toomey grilled SEC Chairman Gary Gensler on the regulator’s role in defining rules for crypto.

Toomey said the SEC didn’t help investors at the time Celsius and Traveller fell and went bankrupt earlier this year. Both lenders promised their customers high returns on their crypto deposits.

Gensler responded by saying that many companies have not communicated directly with the SEC about listing and selling tokens and need to come forward to do so. He also said it’s important to have “a police officer on duty” to regulate cryptocurrency.

After a congressional hearing on Thursday, Dec Wall Street Journal reported that Gensler said proof-of-stake cryptocurrencies that allow holders to earn returns passively through staking, could be classified as securities: “From the coin’s perspective…this is another indication that following the SEC’s “Howey Test,” the investing public expects gains based on the efforts of others.

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